CARACAS, Venezuela -- Panic buyers thronged Venezuelan shops over the carnival weekend after the government of Hugo Chavez announced a surprise devaluation that analysts said was overdue but would only partly right the listing economy.

Domestic appliances such as fridges and cookers were in particularly high demand as Venezuelans snapped up goods imported at the now-defunct exchange rate of 4.3 bolívars per dollar. From now on they will be imported at 6.3 bolívars per dollar.

Opposition politicians seized on what is Venezuela's fifth devaluation since strict currency controls were introduced in 2003, criticising the socialist government for springing an International Monetary Fund-style adjustment package on the country and quietly announcing it on Friday while people headed for the beach over the holiday.

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Although Chavez was re-elected last October after consistently warning during his campaign that an opposition government would implement a "neoliberal package," officials say he ordered the devaluation -- from his hospital bed in Cuba, where he is recovering after a cancer operation two months ago.

The move represents the biggest challenge yet for the country's vice president, Nicolas Maduro, who has been in charge since Mr Chavez left for Cuba and who many expect to succeed the socialist leader if he remains too ill to continue in power. Mr Maduro defended the devaluation as an effort to strengthen the economy by optimising revenues while protecting the currency from "speculative attacks."

Critics say that although the exchange rate adjustment was essential to correct growing distortions in the economy, it did not go far enough, as the currency remains overvalued. It will therefore fail to solve the fundamental problem that the demand for dollars will remain far greater than the amount the government is likely to supply, they argue.

"Either the government burns up huge quantities" of its foreign currency reserves "handing out cheap dollars or there will be shortages," said Luis Vicente Leon, a pollster and economist at Datanalisis.

Local economists estimate that the "equilibrium" exchange rate, at which foreign currency is no longer relatively cheap for Venezuelans, is about nine bolívars to the dollar.

"The big winner ends up being the state," said Asdrúbal Oliveros, an economist at the Caracas-based consultancy Ecoanalitica. The move will relieve pressure on a fiscal deficit variously estimated between 7 and 15 per cent of gross domestic product by increasing the state's net revenues by almost 4 per cent of GDP, or $13 billion at the new exchange rate, according to Mr Oliveros.

The devaluation also cuts the dollar value of domestic debt from $42.9 billion to $29.3 billion, leading analysts to expect an increase in prices of Venezuela's foreign debt.

But while the government gains, most Venezuelans lose out, with Ecoanalitica estimating an 8 per cent fall in consumers' purchasing power. Until the government next decrees an increase in minimum wages, the relative value of workers' salaries will fall.

"Those most affected, apart from consumers, are the multinational companies that couldn't repatriate capital, and they will end up losing from one day to the next 46.5 per cent of their funds accumulated in bolívars," said Mr Oliveros.

Shares in companies with Venezuelan operations, including Colgate-Palmolive and Avon, fell on the announcement.

Mr Oliveros added that the devaluation was also likely to spur inflation, which at more than 20 per cent is one of the highest in the world, since more than a third of the goods consumed by Venezuelans are imported, while around half of locally produced goods rely on imports for their production.

Although, in theory, exporting companies benefit from a more competitive exchange rate, Venezuela exports very little apart from oil, which accounts for around 94 per cent of export revenues.

Moreover, economists point out that domestic industry is unlikely to benefit much from the devaluation because of hostile relations between the government and the private sector, with expropriations often not compensated, as well as a web of economic controls.
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